Yesware raises a $13.5M Series B from Battery Ventures to drag sales from an art into science

The last several years have seen billions of dollars worth of value created in the marketing automation category with companies like Omniture (sold to Adobe for $1.8B), Bazaarvoice ($683M IPO), ExacTarget (sold to Salesforce for $2.5B), NeoLane (sold to Adobe for $600M), Marketo ($465M IPO), and others. Another thing these five companies share in common, other than being responsible for ushering marketing from the realm of art into the data driven digital age, is that they were all backed by Battery Ventures.

Today, Battery is making a large bet that a similar transition is poised to occur in the sales category. The firm is leading a $13.5 million Series B investment into three-year-old, sales-focused email productivity platform Yesware. The round also included existing investors Google Ventures, Foundry Group, IDG Ventures, and Golden Venture Partners, and brings the company’s total financing to $18.5 million.

“As everything moves digital, the old methods don’t make sense anymore – big data demands new technologies,” says Battery Ventures partner Neeraj Agrawal. “We saw this happen with marketing automation over the last six years and expect a similar thing to happen next with sales.”

According to Agrawal, Salesforce moving on-premise CRM into the cloud wasn’t a transformative innovation.

“Reps are still selling the same very manual, very gut-driven way,” he says. “They haven’t yet embraced the data driven approach that Madison Avenue did. The guys on Madison Avenue are now all quant guys, like on Wall Street.”

Yesware offers sales teams using Gmail and Google Apps a browser extension that connects CRM data with email reply rate data and analytics. Other features include user- and team-level email tracking, custom and sharable sales templates, and activity reporting. The aim is to help sales departments make smarter, more data-driven decisions. For example, information like whether the message was opened, when, and how many times can offer insight into the effectiveness of communications that can help teams increase their efficiency.

We’ve always believed that if we help sales people be better at their jobs and make more money, they’ll give us some of it. Early on, we asked ourselves, what do salespeople need, how do they work, and what kind of tools and services would help them? Our answer was they work via email, on the phone (voice), and in person (presentation). We decided to start with email because that’s where today’s salesperson spends the majority of their time – and because email has a historical record and its conversational nature offers useful data.

Awareness of the Yesware’s solution has grown dramatically over the last year, with the company’s registered user count growing to 300,000. The company’s enterprise customers include OpenDNS, Trump Hotels, Acquia, Marin Software, Mimeo, Wildfire, Brightcove, Motorola, Yammer, and LivingSocial, among others. Monthly revenue has increase 1,300 percent over the last year, according to a company statement today, and the number of customers using its Salesforce Sync integration grow by 700 percent year-to-date.

Yesware is available as a freemium product, the success of which Agrawal describes as “the market voting” on its appeal. In many cases, sales reps even pay for the premium version out of their own pocket, before convincing their employer to obtain an enterprise-level account, according to Bellows – a rarity in the enterprise software world.

The next big challenge for Yesware, according to its CEO, is to focus on building brand awareness. “The Google Apps ecosystem is somewhat aware that we exist, but we could be 50X bigger than we are with just our current product,” he says. “Fundamentally, it’s largely a sales and marketing challenge at this point.”

The next major milestone on the product roadmap will be to expand to additional platforms such as Microsoft Outlook and Exchange – where 90 percent of all salespeople still reside. There are significant technical challenges to making this transition, not the least of which are the fact that most instances of the platform are on-premise (rather than in the cloud) and the fact that there are multiple versions of both Outlook and Exchange, each of which is slightly different.

“That’s why you don’t see a lot of successful outlook plugins,” Bellows says.

Additional feature-level updates can be expected in the next few weeks, according to the company, including a Boomerang- and Right Inbox-like ability to schedule emails to send at a future point in time. Longer term, the company anticipates expanding beyond email to address the secondary sales communication channels of “voice” and “presentation” that Bellows alluded to above.

Yesware’s Boston-based team currently stands at 34 people, a number that its CEO would like to see increase to 50 by end of the year and to 100 by end of 2014.

Although it would seem that Yesware faces platform risk due to its dependence on Google- and Microsoft-owned email clients, neither Bellows or Agrawal view this as much of an issue. According to the pair, sales automation is too small of a niche to attract the attention of either corporate giant.

“When you’re running gmail, you need to optimize for global audience of hundreds of millions of people – you can’t focus on salespeople which represent less than 10 percent of your total users,” Bellows says. “To us however, it’s a small but highly valuable niche.”

Yesware is certainly not alone in recognizing this opportunity. Other startups have attempted to bring technology to bear on the sales process, including Elastic with its Close.io intelligent CRM and communications platform, among others. At the same time, several marketing automation companies, including Marketo and HubSpot, are beginning to introduce sales-focused products and features.

Yesware may be the largest in its category today, but the company will likely need to navigate increasingly competitive waters if it is to remain the market leader in the years to come.

Sales is the lifeblood of any organization. Even the best products or services don’t sell themselves. To the extent that Yesware can demystify the traditionally opaque sales process and help teams be more efficient and more effective, the opportunity here is massive. The company has made just a small dent to date, but is showing signs that it understands the problem and is capable of solving it.

There are a laundry list of things that must go right for Yesware to turn into the kind of success story that Battery Ventures has backed repeatedly in the Marketing Automation category, but this is a company to watch closely.